Sources of Lower Financial Decision-making Ability at Older Ages

The proposed research would investigate the possible negative relationship between age and financial decision-making ability. We will consider three main hypotheses. (1) Findings of a negative relationship between age and economic decision-making ability are not the consequences of a causal link between age and financial decision-making, but instead the consequences of older people being born in an earlier cohort and now facing a less familiar economic environment. (2) The negative relationship between age and financial decision-making ability is a consequence of the normal aging process and can be well-captured by declines in other cognitive functions. (3) The negative relationship between financial decision-making ability and age is driven by those individuals who have experienced important declines in health that may or may not be associated with declines in other cognitive functions.